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Determinants of Education Achievement and of the Millennium Development Goals in Honduras

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Determinants of Education Achievement and of the Millennium Development Goals in Honduras Determinants of education achievement and of the Millennium Development Goals in Honduras Marcelo T. LaFleur Department of Economic and Social Affairs United Nations, New York, USA E-mail: [email protected] María Auxiliadora López M. Researcher, Institute of Social and Economic Research,IIES National Autonomous University of Honduras-UNAH Econometrician—Management of Economic Statistics National Institute of Statistics, INE-Honduras Email: [email protected] Abstract Since 1990-2012, basic primary education has been a priority in Honduras’ education policy, with similar importance in the Millennium Development Goals. The objective of this study is to identify and quantify the determinants of school enrollment, grade promotion, and graduation rates in primary school, and to reach an understanding of the role of various factors in the timely completion of primary education by Honduras’ youth. This work aims primarily to quantify the relationship between education outcomes and socio-economic and policy variables to inform the MAMS general equilibrium model of Honduras, but it also serves to identify the policies that are most likely to improve outcomes and reach development objectives. We find that socio-economic and policy variables vary in their impact in education outcomes. We conclude that there are significant opportunities for policy makers to increase the impact of policies on education outcomes, particularly the effectiveness of spending on timely education achievement, but also though improvements in socio-economic conditions. A key lesson of this study is that it provides a rigorous example of how to analyze the effect of policy on outcomes, requiring detailed data and proper statistical technique in support of better informing policy decisions. Acknowledgments: We thank the members of the Inter-institutional Technical Unit (ITU) in Honduras for their contributions, particularly datasets and insight into the workings of the education sector. The ITU was created to use the techniques taught during the project to better advise policy makers. It includes members from the following institutions: UNDP-Honduras, Central Bank of Honduras, Ministry of Social Development, Ministry of Finance, Office of the President, Ministry of Planning and External Cooperation, Ministry of Health, Ministry of Education, the National Statistics Institute, and the National Autonomous University. Significant logistic and financial support was provided by UNDP-Honduras. 1 INTRODUCTION ............................................................................................................................................. 2 2 THE EDUCATION SECTOR IN HONDURAS ....................................................................................................... 4 3 DETERMINANTS OF TIMELY COMPLETION OF EDUCATION GOALS ................................................................ 6 3.1 DATA SOURCES ................................................................................................................................................. 7 3.2 ESTIMATING THE DETERMINANTS OF TIMELY COMPLETION OF PRIMARY EDUCATION ....................................................... 9 3.2.1 Estimating the wage premium of educational achievement ................................................................. 10 3.2.2 Determinants of educational achievement ............................................................................................ 11 4 CONCLUSION AND IMPLICATIONS FOR POLICYMAKING .............................................................................. 16 REFERENCES ......................................................................................................................................................... 18 ANNEX I ............................................................................................................................................................... 21 ANNEX II .............................................................................................................................................................. 22 ANNEX III ............................................................................................................................................................. 24 ANNEX IV ............................................................................................................................................................. 25 1 Introduction Economic and social difficulties at the global level, such as was seen in the recent financial crisis and is evident in the ongoing global economic conditions, as well as domestic circumstances create uncertainties for the design of human development policies. Prior to the onset of the most recent crisis, studies showed that Latin America and Caribbean countries had a viable path to reach the Millennium Development Goals (MDGs) by the target date of 2015, though only with additional investment and other public interventions (Vos, Sánchez, and Kaldewei 2008). The evidence pointed out that the method of financing this additional spending should be carefully considered due to the effect that raising the funds necessary would have on macroeconomic conditions in countries. Experience shows that a development policy that is able to achieve the MDGs requires a sustained increase in social expenditures, growth in demand for labor, an improvement in income distribution, as well as a strategy for financing new spending that optimizes the mix of tax revenues and foreign borrowing. Another study estimated the cost necessary to reach the development goals in 18 countries of Latin America and the Caribbean. In the case of the targets for education, child mortality and maternal mortality, and access to water and sanitation services, the additional cost range from one to seven percentage points of GDP each year, relative to a base scenario (“business as usual”). Honduras is the country with the largest additional spending needed (Rob Vos et al. 2010). Altogether, the additional costs required to reach the MDGs in the region were reasonable, as long as the financing of these expenditures were carefully considered. The effect of the 2008-2009 crisis and the ongoing economic difficulties around the world have worsened this outlook significantly. An analysis of the effects of the global crisis on the likelyhood of attaining the MDGs in six countries of Latin America found that, in lower income countries, the additional cost to reach the goals would range from 1.6 to 3.4 percentage points of GDP each year between 2010 and 2015 above the spending estimated before the crisis. Again, Honduras led the 2 group with the largest additional spending needed as its spending in education, health, and basic services would need to increase by an additional 3.4 percentage points of GDP per year above the seven percentage points needed before the crisis (Sánchez and Vos 2010). This reality is daunting for governments who have been committed to reaching development targets. More importantly, the adjustments necessary to accelerate progress will have large repercussions in economic and social conditions in the respective countries. It is of great value for policy makers to understand the total cost of achieving development goals in a given time frame, but it is also important for the policy makers to have sufficiently detailed information on the specific spending policies and financing strategies that can help the country achieve the MDGs and other development goals. Computable General Equilibrium models (CGE) are often used to provide comparative analysis of policy options and to estimate the relative impact of alternative strategies. The present work is part of ongoing activities to transfer capacities to selected countries on the use of the Maquette for MDG Simulation (MAMS) general equilibrium model and an associated microsimulation framework. The model requires careful estimates of the interaction between certain parameters that form part of the human development module, such as how changes to public spending on education affects grade promotion rates. This study aims to provide some of the estimates needed for technical staff in Honduras to be able to run the MAMS model and compare policy options and outcomes. However, while the motivation is to provide the inputs needed by the MAMS model, we go beyond simply estimating the determinants of development outcomes and attempt to shed light on areas where the relationship between its policy and outcomes can be improved. With such careful analysis, policy makers can better understand the efficiency and cost effectiveness of the various policy options to achieve the MDGs. The specific focus of this study is on estimating the elasticities for the determinants of education achievement (MDG 2A), as well as documenting the methodology and data needed for the exercise. We estimate the effect of socio-economic and political factors on net on-time primary completion rate by estimating three separate education outcomes: school enrollment, grade promotion, and graduation rates. Other studies have estimated elasticities for child and maternal mortality (MDG 4A and 5A) and for access to water and sanitation services (MDG 7C). MDG Description Instrument in MAMS MDG 2A Universal primary education: by 2015, The net on-time completion rate in each all children have completed primary cycle (primary, secondary, tertiary) is a education. funtin of timely enrollment, grade promotion, and graduation. MDG 4A To reduce by 2/3 mortality
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